Would You Buy This Article?

Apple's (Nasdaq: AAPL) plan to transform the publishing business, if it indeed has one, could involve allowing readers to purchase articles and book chapters as if they were songs available in the iTunes Store.

That's my take on an article first published in yesterday's edition of The Wall Street Journal that offers details and insight into the Mac maker's plan for its forthcoming tablet, due to be introduced at a press event on Jan. 27 in San Francisco.

The Journal cites anonymous sources familiar with Apple's thinking that say "Apple could change conventional payment structures" for downloadable content, and that the Mac maker is in talks with New York Times Co. (NYSE: NYT) about selling through the iTunes store.

Interestingly, the Journal's findings jibe with an earlier report in New York magazine, which said New York Times Co. is no more than weeks away from announcing a pay-to-view scheme for stories and other content that appear on the Web.

Why this makes sensePublishers need the help -- just like the music industry did when Apple CEO Steve Jobs came calling in 2003, iPod in hand.

Labels such as Warner Music (NYSE: WMG) and Sony (NYSE: SNE) haven't improved much since allowing iTunes to sell tracks individually, but piracy was killing the CD business long before iTunes became the world's largest music retailer. Now, producers and artists are earning a cut on every download.

News publishers such as Gannett (NYSE: GCI) could do better because there's no golden goose to kill. Print is suffering, and Web content isn't much of a revenue driver for those not named News Corp. (Nasdaq: NWS) . Anything that changes the equation is at least worth considering.

Why iSlate + iTunes might cause troubleAnd yet one-off article purchases via a snazzy new device -- no matter how well designed -- isn't likely to be enough. The still-ailing state of music labels proves as much. Newspapers, magazines, and book publishers will have to change their business models to adjust to the new reality of consumers shopping for and buying content by the slice.

We don't yet know if publishers can do this profitably. News Corp. charges an annual subscription to most of the Journal's digital content. The Times seems to be entertaining something similar. Judging by News Corp. CEO Rupert Murdoch's bare-knuckles attack on Google's (Nasdaq: GOOG) news aggregator, this is how publishing's entrenched interests prefer it.

But they may not have a choice. Consumers already single out content using social bookmarking services such as Digg and StumbleUpon, and using the trending topics on Twitter. Readers post about the articles and books they like, not the publications and authors they read. (By and large, anyway.)

Don't blame consumers for this, Fool. The Web has so much stuff that it absolutely requires filtering. It encourages content by the slice, because that's all we can consume. The publishers' problem is that, if given the choice, readers will pick and choose the tastiest morsels and avoid everything else.

Steve vs. Eric, get ready for Round 1What's really fascinating to me as an investor in and observer of both Apple and Google is how the iSlate, if it adopts iTunes pricing for published works, could get a giant boost from The Big G.

We already have good evidence that Apple is interested in extending iTunes from the desktop to the cloud through its recent acquisition of Lala.com and its cheap, Web-based streaming service. A new Web populated by "buy this song on iTunes" buttons isn't difficult to imagine.

And if that isn't difficult to imagine, it also shouldn't be difficult to fathom these same buttons appearing at the bottom of articles and stories. "Buy and download to iSlate," they might read. You know who's going to index the content that has these buttons? Google. The Big G may be referring sales to Apple and its publishing partners.

Call it a classic case of Jobs Jujitsu, one I hope we get to see.

Is content by the slice more your style? Or do you prefer to subscribe to a newspaper or magazine? Make your voice heard using the comments box below.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

I certainly don't think they'll be able to sell content "by the slice" as you put it. That would be like the psychology of toll roads. There is a negative feeling whenever you see a new line of toll booths up ahead. That's not the way publishers should price and sell their products online.

Distribution has been the publishing industry's bugaboo for years. Revenues from magazine sales, whether on news stands or by subscription, mostly go to pay for printing and distribution. It's the content and information that the reader wants but he's paying considerably more for delivery.

The music industry's success with iTunes tracks to the perceived low cost for the consumer. $1 per song seems like a trivial expense especially when you consider that you own the song and can play it as many times as you want.

Publishers would do well to focus on that example. If they price their product low enough, consumers will buy it. For instance, suppose the annual subscription price for a magazine is $18 and the newstand price is $2, try offering one year subscriptions online for $2.99.

I think they'll find that demand is highly price elastic. If they cut the price by 90% they may increase subscriptions by 300%. Since the cost to distribute is purely variable, they'd be smart to go for a much larger distribution. Then they have a better story to tell advertisers.

Consumers will pay full price for a publication when they have a burning interest in the topic. But more often their interest is casual. For example, I have a casual interest in the Wall Street Journal. I'll flip through it if I find it on the coffee table but I won't pay those high subscription rates. The same is true for Bon Apetite, Good Housekeeping, Sports Illustrated, etc.

The question is not either/or as you posed it on content purchasing. It's both (and more). As a fan of both newspapers and electronic content, I would jump at the chance to subscribe to one or more quality newspaper's online content...but they need to update their content and approach to delivering that content that takes advantage of an electronic delivery medium. For example, I should be able to purchase a single day (24 hrs) worth of content like I can purchase a single day newsprint. I should be able to subscribe for given periods (e.g. 3, 6, or 12 months with greater discounts) of the weekly and/or weekend editions. The advantages of the electronic over newsprint is that I can buy a single article (and would gladly) or could buy access to search the publisher's archives (what an awesome capability). Furthermore, electronic versions are not limited by "column inches", could have more pictures/video, and could be updated instantly as information changed or more became available. Finally, let's call it the "ePub" (newspaper doesn't quite work anymore) would be available when I'm ready for it, where I'm ready for it, and doesn't consume massive amounts of natural resources (like the delivery of old fashioned newsprint that's already out of date when it hits my lawn).

To the publishers of the world, bring your quality content and innovation to the "ePub" world. I'm ready for it and willing to pay!